Concerns over rising carbon dioxide emissions are affecting investments in the oil and gas sector and fueling a movement against natural gas use, prompting the industry to go on the defense.
Roughly 40% of private equity investors say they will be reducing investments in the oil and gas sector in the next five years because of climate change concerns, according to a winter outlook survey conducted by secondary market investment firm Coller Capital Ltd. "Limited partners who do expect change to their investment strategies are broadly planning to replace oil and gas exposure with investment in renewable energy and climate-friendly products and services," Coller said in the survey's Nov. 28 release.
However, while 57% of the 113 limited partner investors surveyed in Europe and Asia said they were changing energy strategies in reaction to climate change, only 30% of North American limited partners said the same, according to the survey.
Global carbon dioxide emissions are projected to hit a new peak in 2019, while growing at a slightly slower rate than in recent years primarily due to a steep decline in coal-fired generation use in the U.S. and the European Union, according to a report by the Global Carbon Project.
The report projected that global emissions in 2019 will increase by 0.6% over 2018 emissions. In comparison, emissions climbed 2.1% in 2018 and 1.5% in 2017 over the previous years. The lower rate of growth is due to substantial declines in coal use in the EU and U.S., slower growth in coal use in China and India compared to recent years, and weaker economic growth in some countries, the report said.
At the same time, the report said natural gas and oil use around the world is surging as developing countries seek greater prosperity through more natural-gas-fueled electricity and gasoline-powered transportation, and per capita emissions in affluent countries remain disproportionately high. China's emissions are projected to increase by 2.6% in 2019 over the prior year while U.S. emissions are expected to fall 1.7%.
A rise in the number of cities banning natural gas for heating and cooking in new buildings prompted the American Gas Association, or AGA, to work on forming a coalition among industry, consumers, and construction and labor groups to push back. The trade group, which represents more than 200 gas utility companies, sees partnering with organizations that represent interests such as restaurants and real estate to be critical in preventing more municipal ordinances that prohibit gas.
AGA said utilities could directly fight bans through lawsuits, or the association could pursue litigation on behalf of a member company. But AGA said utility-driven opposition would be a less effective approach.
The gas industry and utility regulators have expressed surprise at the success of anti-fossil fuel advocates who have spurred cities to sideline gas. AGA has argued that the bans on gas in new construction deprive customers of choice without presenting a thoughtful alternative, and that a rapid shift to electricity could result in increased consumer costs and emissions impacts.
The AGA said it will make the case that natural gas plays a key role in reducing emissions while being an affordable and reliable form of energy.